Teaching UGC NET Mock Test Series 2025 (Paper 1 & 2) Business Studies Finance and Trade International Trade
Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R). Read the statements and choose the correct answer using the code given below.
Assertion (A): The nominal interest rate comprises of a real interest rate and an expected rate of inflation, and it adjusts when the inflation rate is expected to change. Hence, in the perfect international capital markets, real rate of returns are equal in the two countries.
Reason (R): The international Fisher Effect states that the nominal interest rate differential must be equal to the expected inflation rate differential in the two countries.
1
Both (A) and (R) are correct and (R) is the right explanation of (A).
2
Both (A) and (R) are correct but (R) is not the right explanation of (A).
3
(A) is correct but (R) is not correct.
4
Both (A) and (R) are incorrect.